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GB.271/12
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TWELFTH ITEM ON THE AGENDA
Report of the Subcommittee on Multinational Enterprises
1. The Subcommittee on Multinational Enterprises met on 20 March 1998. It was chaired by Mrs. J. Perlin (Government, Canada). The Employer and Worker Vice-Chairpersons were Mr. B. Noakes (Employer, Australia) and Mr. Z. Rampak (Worker, Malaysia) respectively.
2. The Chairperson extended a warm welcome to all members of the Subcommittee, and especially to Mr. Rampak, who had succeeded Mr. Baldassini as Worker Vice-Chairman of the Subcommittee. She asked Mr. Rampak and the secretariat of the Workers' group to convey to Mr. Baldassini the appreciation of the Subcommittee for the spirit of cooperation which he had helped to create and his contribution to the work of the Subcommittee.
3. The Committee had the following agenda:
- Promotional activities, technical advisory services, completed studies and current research by the Office.
- Request for interpretation of the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy.
No paper was submitted concerning the second item, since the incomplete document that had been inadvertently distributed had been withdrawn.
Promotional activities, technical advisory services,
completed studies and current research
by the Office
4. The representative of the Director-General (Mr. Abate, Chief, Bureau for Multinational Enterprise Activities) introduced the Office paper, which summarized the promotional activities, technical advisory services and research carried out by the Office over the past year.(1) He informed the Subcommittee that a Memorandum of Social Understanding (MSU) had been signed by the Government and social partners in the Philippines and that representatives of trade unions in other Asian countries had called for similar texts to be elaborated and applied in the region. In Latin America, the ILO's constituents had expressed interest in working more closely with the ILO. One positive development that had taken place in late 1997 was the adoption of a resolution by the Joint Parliamentary Commission requesting that MERCOSUR member States accept the Tripartite Declaration as the standard for dealing with social and labour matters relating to foreign direct investment (FDI), the activities of multinational enterprises (MNEs) and, as far as possible, those of national enterprises. The Office was discussing with MERCOSUR the possibility of undertaking joint activities to promote the Tripartite Declaration. In the Asian region, a tripartite round table involving approximately 50 delegates would be held in the first week of April in Viet Nam. The decision to hold the round table was taken after discussions with the Government and the most representative employers' and workers' organizations. The round table would bring together, for the first time, local and foreign investors, as well as representatives of the Government and employers' and workers' organizations. It would afford them an opportunity to discuss the best ways in which they could cooperate, in an effort to minimize social and labour-related difficulties that might pose an obstacle to further investment. As regards research activities, an attempt was being made by the Office to focus on a wide range of industries in which MNEs operated, as well as on ILO member States in different regions. Research on the labour practices of Japanese MNEs in Australia had been commissioned recently. It would provide some insight into the conduct of investors from an industrialized country in another industrialized market economy.
5. The Employer Vice-Chairperson noted with appreciation the good relations to which Mr. Baldassini had contributed during his period as Worker Vice-Chairman and the willingness with which he had cooperated in the work of the Subcommittee. He welcomed Mr. Rampak, Mr. Baldassini's successor, and expressed the hope that the same level of cooperation and understanding would continue. Referring to paragraphs 1 and 2 of the Office paper, he noted that there could have been some indication of the periods during which the promotional activities in the United States had been carried out. He expressed displeasure at the inclusion of some of the organizations mentioned in paragraph 1 in the same context as organizations which represented US employers in the ILO. Some of the objectives and activities of the former were not in line with those of the latter. In his opinion, the link between the Tripartite Declaration and codes of conduct in paragraph 2 of the paper should not have been made, since they were instruments with distinct characteristics. Whereas the Tripartite Declaration was a general, voluntary instrument representing a general commitment to certain principles, codes of conduct were different and specific in character. He asked for further information on the tripartite round table which according to paragraph 4 of the paper was to have been held in Jakarta before the end of 1997. The Employers' group welcomed the discussions that had taken place in the Philippines and the signing of the MSU (paragraphs 5 and 6 of the paper). The MSU was voluntary, and in essence it reiterated the commitment of the Philippines to the Tripartite Declaration. The regional symposium mentioned in paragraph 7 had also expressed approval of the MSU. As regards the information in paragraphs 9 to 19, which dealt with developments in MERCOSUR, the number of jobs lost seemed to be overstated. There had been extensive reductions in the workforce in the areas mentioned, but it was not accurate to attempt to lay the blame for those developments at the door of privatization, FDI and technological change and innovation. There were other factors, including substantial overstaffing, that accounted for the job displacements in many enterprises. The MERCOSUR discussions on the Carta Social were at a preliminary stage. It was not yet clear whether there would be an understanding on that question, or if there were, the form that it would eventually take. Members of the Employers' group in that region would have strong views on the content of whatever document might be agreed. He took note of the promotional activities mentioned in paragraph 20. With reference to the tripartite round table to be held in Viet Nam in April, he asked for information on the proposed activities. He took note of the information relating to completed studies and current research (paragraphs 23-25). The information in the paper was welcomed, but he stressed that account must be taken of his comments and the reservations that he had expressed with respect to certain matters.
6. The Worker Vice-Chairperson stated that he would convey to Mr. Baldassini the best wishes and thanks expressed by the Subcommittee for his good work during his period as Worker Vice-Chairperson. He noted that the limited activities mentioned in the report demonstrated the severe budgetary constraints under which the Office programme on MNEs was operating, at a time when these entities were playing an increasingly important role in the process of economic globalization. As in the past, his group deplored that unsatisfactory situation. He expressed the hope that in the forthcoming preliminary discussions on the programme and budget proposals for the next biennium, due attention would be given to that important matter. Despite the limited resources, measures had been taken to promote the Tripartite Declaration. Referring to the activities mentioned in paragraph 3, he noted that, since the United States was still the largest home country of MNEs, observance of the Tripartite Declaration by US companies could have a great impact on other countries. Moreover, failure on the part of those enterprises and other MNEs operating in the United States to observe the principles continued to pose serious problems. He called for intensive promotional activities to be undertaken in developing countries. As regards the signing of the MSU in the Philippines, the Workers' group considered it to be an encouraging step and a good model that should be emulated by other countries. There were opportunities for promoting the involvement of the ILO in the area of company codes of conduct. The best codes of conduct adopted so far were based on ILO standards. Mechanisms for monitoring the application of codes were necessary if codes were to be meaningful, and not merely public relations exercises. The Office could provide valuable technical assistance to developing countries to help them devise monitoring programmes and train monitors. There was also a need for different ILO departments involved in work on codes of conduct to consult each other, coordinate their activities and provide more technical assistance to the social partners. With respect to research, the fact that only two studies had been completed attested to the scarcity of resources. Nevertheless some useful and important research was being undertaken. He asked whether there was a report on the outcome of the round table that was supposed to have taken place in Indonesia by the end of 1997. In response to the Employer Vice-Chairperson's comments on the job losses mentioned in paragraph 12, he noted that privatization did result in the suppression of jobs. That was the case in his country, and on many occasions the Workers' group had voiced concern in that regard. The Workers' group had no problem with the content of the paper, and he hoped that the situation resulting from the present economic downturn in Asia would be reflected in similar papers prepared by the Office in the future. That would make it possible for the Subcommittee to monitor developments with respect to employment in MNEs in the region, especially in MNEs from Asian countries where rigid structural adjustment policies were being introduced. On the whole, the Workers' group welcomed the information in the paper.
7. The representative of the Government of the United States took note of the information contained in the paper. He thanked the Office for its intensive efforts in promoting the Tripartite Declaration and noted in particular the various meetings that had been held in Washington and New York. He reiterated his Government's continued support for the voluntary principles contained in the Tripartite Declaration and welcomed the efforts by the Office to promote acceptance of those principles and their incorporation in the culture and practice of international business. He recalled that, from the replies to the sixth survey on the effect given to the Tripartite Declaration, there was growing evidence that the principles of that voluntary instrument were being applied in many countries. His Government looked forward to the next survey, which would be part of an ongoing initiative that was duly appreciated. He thanked the Office for continuing to provide within the ILO a focal point for efforts to address the subjects covered by the Tripartite Declaration, and to carry out very important research.
8. The representative of the Government of Italy expressed satisfaction with the quality of the Office paper, which he had read with interest. Economic globalization was one of the main features of the present era, and was a process in which MNEs naturally assumed an increasingly vital role. In the light of that development, it was even more important for the Tripartite Declaration to be disseminated and for enterprises to be made aware of its existence and content. The efforts that had been made to promote the Tripartite Declaration were appreciated, as were the activities mentioned in paragraph 20 and the research that was being carried out. He looked forward to the completed studies being widely circulated. He noted the importance of placing the Tripartite Declaration in its proper context. It was a voluntary instrument. However, the fact that it was approved in a multilateral forum gave it an authority that was generally recognized.
9. The representative of the Government of Canada thanked the Office for the informative paper and commended those governments, as well as employers' and workers' organizations, that had helped to enhance the credibility and effectiveness of the Tripartite Declaration. The work of the Subcommittee and the Office had to be put into context. The number of MNEs had grown exponentially over the last 20 years. In her Government's view, there had been a resultant decline in the influence that national governments could exercise over the activities of MNEs. The large majority of MNEs were engines of growth, job creators and good corporate citizens. However, there were cases where they were not. Referring to ongoing negotiations in another forum on the Multilateral Agreement on Investment (MAI), she noted that the MAI was expected to facilitate the further growth of MNEs and that, under those circumstances, her Government believed that multilateral efforts should be intensified to address the social dimension of the operations of MNEs worldwide. ILO instruments, including the Tripartite Declaration, could make an increasingly important contribution to those efforts. The voluntary nature of the Tripartite Declaration should not detract from the fact that the parties concerned had undertaken a commitment that should be respected. As regards the research, there was no knowledge of the study on women workers in retailing in Canada. She requested that in the future the government and social partners in the countries concerned should be informed of research activities and invited to contribute to them.
10. Recalling the Employer Vice-Chairperson's comments on paragraph 1 of the paper, Mr. Katz (Employer member) stated that it was obvious when the Office held consultations in the United States that it should meet not only with the US Council for International Business but also the AFL-CIO and different governmental agencies. However, he noted with dissatisfaction that organizations known for their anti-business biases and which had as their objectives the criticizing of business had been consulted. As regards codes of conduct, there were, both in the United States and the ILO, moves towards propagating the idea that codes of conduct should have independent monitoring mechanisms. The business community was opposed to such initiatives, which were not new, and to the idea of having codes of conduct imposed either legally or by other forms of pressure. He drew attention to a statement issued by the US Council for International Business in July 1997 in response to certain legislative initiatives in that regard, and noted that views contained in that publicly available document were shared by most business organizations.(2) As regards the commitment of parties to observing the Tripartite Declaration, he recalled that both the Tripartite Declaration and the OECD Guidelines for Multinational Enterprises had been commended for observance by all the parties concerned, including employers. The average company was not aware of those documents. In certain cases where problems had arisen, employers did not even know that they had been expected to observe any principles other than the standards embodied in the national law and practice of host countries. To contend that parties had a "commitment" or had made a "promise" to apply such instruments was a tenuous argument. There had been examples of unsuccessful political attempts in the US in the mid-1970s to encourage businesses to endorse the OECD Guidelines by making reference to them in company reports. In short, whereas the employers' organizations commended the Tripartite Declaration and OECD Guidelines to their members, the individual corporations, at least those in the United States, had not made a commitment or promise to observe those instruments. As regards the exponential growth of multinationals, he noted that in the UN World Investment Report 1997, the activities of MNEs consisted of various transborder trade and investment arrangements not only by large well-known corporations, but also by a growing number of enterprises from developing and newly industrialized countries. On the issue of redundancies resulting from privatization, it was a fact of life that privatized enterprises were overstaffed and that even State-run enterprises were being streamlined as part of structural adjustment measures and a general worldwide orientation to market-driven policies and the search for competitiveness. The problem of redundancies was critical and had been addressed by the ILO for several years. It deserved action by the Office, including the design of temporary labour-intensive employment schemes, which were under discussion in the Committee on Employment and Social Policy. Workers suffered severely from job cuts. The ILO needed to focus on the adverse effects of redundancies. The results of efforts so far, in that respect, had been disappointing. There was a need to go beyond the laying down of guidelines relating to the provision of information and the holding of consultations in connection with lay-offs, as recommended in the Tripartite Declaration. While such actions were designed to mitigate the adverse consequences of workforce reductions, they did not resolve the problem.
11. The Worker Vice-Chairperson stated that his group fully supported observations about the commitment of the social partners to promoting the observance of the Tripartite Declaration, which had been adopted more than 20 years previously. It had become a fundamental source of guidelines for dealing with the issues that it encompassed. The voluntary nature of the Tripartite Declaration did not mean that it should not be observed by all the parties concerned, including enterprises themselves. He did not share the view that enterprises were reluctant to accept systems for monitoring the application of codes of conduct. There was evidence that they were sensitive to the commercial implications of demands by consumers for products made by enterprises that respected the ILO's core labour standards. There had been cases of enterprises requesting assistance from the ILO and the international trade union organizations, particularly the ICFTU, in the drafting of codes of conduct and monitoring systems.
12. The representative of the Government of Namibia considered that important promotional activities were being carried out mainly in home countries of MNEs. He suggested that more promotional work be undertaken in host countries in Africa and other regions. With respect to the research on Namibia (paragraph 25), he urged that the Government be closely informed and involved, since that could enhance the research significantly.
13. The Employer Vice-Chairperson stated that it was not useful to refer to the Tripartite Declaration as a code of conduct. It had a character of its own, and that should not be distorted. As regards privatization, this was not an issue within the Subcommittee's mandate. Privatization did not arise from the activities of MNEs. It was the result of policy decisions taken by governments.
14. The representative of the Director-General thanked the Subcommittee for the encouragement and positive comments about the promotional work carried out by the Office. They gave reason for optimism in pursuing those activities. The cooperation of governments and the social partners in that regard would be welcomed. As regards the round table that was scheduled for the end of 1997 in Indonesia, the prevailing situation in that country with regard to pluralism of trade unions had made it difficult for the Office to proceed with the activities, since the participation of all the individuals and different unions concerned could not be assured. None the less, a round table had been held at the initiative of the tripartite partners in Indonesia, and they had concluded an agreement. In the case of the meeting scheduled for early April in Viet Nam, the aim was to address, in a tripartite forum, widely reported labour problems that had emerged in certain enterprises with foreign participation. The Office was requested to help create a basis for better dialogue and cooperation among the parties concerned. The ILO would provide funds to bring together some 50 participants from different parts of Viet Nam to inform them of the Tripartite Declaration and to give them the chance to discuss the steps that could be taken, either on an individual or collective basis, to minimize the labour-related difficulties that had arisen. The objective was to create awareness of the importance of involving labour institutions, along with other governmental agencies, in addressing the social aspects of investment-related matters from the outset. As regards the research on Canada, the working paper in question contained a list of officials from government, employers' organizations and trade unions in Canada, who had provided information for the preparation of the study. He assured the representative of the Government of Canada that in future efforts would be made to enlarge the pool of those being consulted to include those with whom the Office worked closely. As regards the involvement of non-governmental organizations (NGOs) in discussions held during consultations in the United States, he emphasized that there was no intention of consulting the NGOs on work that was to be done by the ILO. The purpose of the meeting was only to apprise them of the Tripartite Declaration and to encourage them to use its principles when carrying out their work. Organizations such as Business for Social Responsibility would be able to reach a much larger group than would otherwise be the case. Entities such as the Inter-Faith Council on Corporate Responsibility had considerable influence in the United States. They were known to use their influence as shareholders positively on enterprises to make their policies more responsive to social and labour concerns. The Office was not aligning itself with any other initiatives. Its intention was to make the NGOs aware of the Tripartite Declaration which could be used in their activities. Noting that the Tripartite Declaration was not known in many places, he urged members of the Subcommittee and, through them, the ILO constituents in general, to disseminate the text of the Tripartite Declaration. He thanked Mr. Katz for having accepted to distribute copies to members of his organization. Replying to earlier comments made by the representative of the Government of Namibia, he stated that researchers were always instructed to contact governments, as well as the representative employers' and workers' organizations in the countries being studied, and to include the views and concerns of all the parties. The Office would strengthen measures to ensure that those instructions were respected. In closing, he paraphrased a statement made by Mr. Oechslin, Employer Vice-Chairperson of the Governing Body concerning the voluntary nature of the Tripartite Declaration: it was not the legal nature of an instrument that was important, at least in the ILO, but the tripartite commitments made on the basis of consensus, which had much more of an effect. Notwithstanding its voluntary nature, the Tripartite Declaration carried the commitment of all the ILO constituents that were involved in its elaboration and adoption and had submitted reports for the periodic surveys on the effect given to the Tripartite Declaration.
15. The Employer Vice-Chairperson welcomed the comments made by the representative of the Director-General, especially those pertaining to the voluntary nature of the Tripartite Declaration and the importance of commitment to it. He noted the Office's interest in involving the ILO constituents more fully in promotional and research activities. It had been brought to the attention of the Employers' group that the Office had written directly to a number of MNEs in Japan. His group took objection to the tone of the letter which emphasized the alleged negative impact of the operations of MNEs. The purpose of the letter was to inform the enterprises that the Office wanted to organize a dialogue with MNEs, to be held in autumn 1998. It mentioned the need to limit the number of participants to "... those select few who in our view have good records in the labour and social field or are working in that direction ...". The clear message was that the vast majority of MNEs did not have good records in the labour and social fields, nor were they working in that direction. His group found that formulation particularly objectionable. He requested information on the proposed dialogue with MNEs, which was not mentioned in the current programme and budget. Neither his group nor, to his knowledge, the other constituents had been informed about it. Nor had any mention of that meeting been made in the paper that reported on the Office's promotional activities. This seemed an attempt by the Office to bypass constituents and go straight to individual MNEs to organize a formal meeting with them. If the Office did not involve the constituents and cooperate with them in order to contact MNEs for any purpose, then the existing climate of cooperation would be seriously compromised. He asked that the records show the strong objection of his group to such unilateral initiatives.
16. The Worker Vice-Chairperson stated that, since his group had not seen the letter to which the Employer Vice-Chairperson referred, they were not in a position to comment on it. However, in principle, the Office should be free to conduct its activities. Any attempt to restrict its freedom of action would not be accepted.
17. The representative of the Director-General reported that a letter had indeed been sent to a very small number of MNEs concerning the possibility of organizing a dialogue with multinationals with a view to determining the level of interest in such a meeting and the feasibility of holding it. The meeting, should it materialize, would be an attempt to bring back to the ILO, which had the mandate, the competence and a legitimate role, those labour issues arising in the context of globalization that were being increasingly raised for consideration in other multilateral forums. These as well as other ideas were being considered, but they had not yet crystallized and could therefore not be brought to the Subcommittee for the moment. The Office was therefore not in a position to report to the Subcommittee, and there had never been any intention to bypass the ILO's traditional constituents.
18. The Chairperson stated that since copies of the letter had not been circulated, a discussion of the matter might not be possible. She proposed that the Subcommittee take note of the comments and objections made by the Employer Vice-Chairperson. The statement by the representative of the Director-General that developments could well be reported to the Subcommittee at a later stage should also be noted.
19. Mr. Katz (Employer member) asked whether the letter in question had also been sent to MNEs in other countries, including the United States. He shared the views expressed by the Employer Vice-Chairperson, and cautioned against suggestions that the operations of MNEs had negative effects and that they therefore "needed cover", along the lines suggested in the letter and by the Worker Vice-Chairperson. The tone of the letter was not likely to elicit a positive reaction from enterprises to the Tripartite Declaration. Since voluntary instruments and voluntary undertakings were very fragile, an inappropriate approach to those issues could easily evoke a negative response. For example, business management might react badly if an anti-business NGO invoked the Declaration for whatever purpose at a shareholders' meeting.
20. The Employer Vice-Chairperson stressed that his main concerns were about the process and procedure that had been followed for contacting the enterprises, and in his view the explanations provided were unsatisfactory. The Employers' group sought an undertaking by the Office that there would be consultations on the matter and that the procedure would go no further until such consultations had been held.
21. The Worker Vice-Chairperson reiterated that the freedom of the Office to contact or communicate directly with anyone in discharging its duties should not be restricted in any way.
* * *
Request for interpretation of the Tripartite Declaration of Principles
concerning Multinational Enterprises and Social Policy
22. The Chairperson noted that the second item on the agenda concerned a request for interpretation. There was no document: a version issued in error had been withdrawn. The Officers of the Subcommittee had met several times with a view to drawing up a document acceptable to all the parties, but there had not been enough time to complete the discussions. Consequently, the Officers unanimously proposed that the discussion of the request for interpretation be postponed. The Officers would continue with the discussions in an attempt to produce a document that would be acceptable to all the groups. It could then be circulated well in advance of a meeting of the Subcommittee, which could be held either just before or after the International Labour Conference, either at the end of May or the end of June.
23. The representative of the Government of the Russian Federation said that his delegation attached great importance to the issues that had been raised during the discussion of the first item on the agenda. Since the transitional economies of the Commonwealth of Independent States were becoming increasingly involved in the process of globalization, the proceedings of the Subcommittee were of great interest to them. He asked that the document for the proposed meeting be made available in Russian.
24. The representative of the Government of Italy supported the proposal for a postponement of the discussion of the request for interpretation.
25. The representative of the Government of the United States expressed his full support for the proposal. He urged that additional, relevant facts be requested from all the parties concerned, and included in the documents. A full rendering of the facts was of great value in such deliberations.
26. The representative of the Government of Japan noted the importance of holding full discussions on the matter and expressed his support for the Officers' proposal for a meeting to be held later in the year.
27. The Chairperson noted the requests for the documents to be translated into Russian and for the additional facts pertaining to the request for interpretation to be included in the papers.
28. The Worker Vice-Chairperson noted that his group fully supported the efforts by all the parties to reach an agreement on the request for interpretation. If the Officers failed to reach an agreement on the matter, then alternative texts would be brought before the Subcommittee. He proposed that, if possible, the Subcommittee should meet before the International Labour Conference of June 1998.
29. The Employer Vice-Chairperson supported the proposal for a postponement of the discussion of the request for interpretation to a later date.
30. The Governing Body may wish to endorse the agreement reached in the Subcommittee that it should reconvene towards the end of May 1998, or during the 86th Session of the International Labour Conference, or immediately thereafter, to discuss the request for interpretation, it being clearly understood that the relevant documents on the matter would be despatched to members of the Subcommittee by mid-May at the latest.
Geneva, 24 March 1998.
(Signed) Jean Perlin,
Chairperson and Reporter.
Point for decision: Paragraph 30.
2. Statement of the US Council for International Business, "Codes of conduct: Old solutions to old problems", 9 July 1997.